Monday, Sept. 12, 2005 | 9:27 a.m.
Editor's note: In 2001, West Virginia lawmakers set out to control illegal gambling by creating a state-run industry that allowed bars, restaurants and fraternal organizations to operate video lottery machines. Despite its detractors, the Limited Video Lottery Act has been a financial windfall for the state and has created million-dollar mini-casinos across West Virginia. This is part one of a three-part report examining the industry.
CHARLESTON, W.Va. -- At places like The Hot Spot, Mimi's and The Owls Nest, in suburbs, strip malls and faded downtowns, West Virginia gamblers poured $1.05 billion into video lottery machines within the past year -- enough to fund nearly a third of the state budget.
These parlors reflect the state's attempt to curb illegal gambling by placing such machines under the control of the Lottery Commission. They have fulfilled predictions both good and bad, according to an Associated Press analysis of records for the fiscal year that ended June 30.
Players won a hefty $739 million. The state received a $124 million cut -- a 31 percent increase over the prior year. County and local governments received another $6.08 million.
That left $173 million in profits for the leasing companies and the restaurants, bars and parlors where the machines are played.
"Yeah, we're making money," says Tom Banketas, who owns five Northern Panhandle clubs including Front Street in the post-steel town of Weirton. "So what? What else is there?"
But with success has come concerns by some lawmakers and citizens groups who object to the growth and expansion of the gambling parlors. Also, some of this success has come at the expense of at least two of the state's four racetracks. They say the parlors are cutting into the profits they make from their own slot machines.
To defend themselves, track owners say they should be allowed to introduce table games to compete against the in-state machines and threats from out-of-state slots.
During this week's special legislative session, racetrack supporters want Gov. Joe Manchin to include table games and restrictions on video lottery on the agenda. Gambling opponents, meanwhile, want the governor to reduce the number of limited video lottery machines or outlaw them.
Manchin has said he won't act unless lawmakers bring forth a proposal. But he pledged last week that if lawmakers don't, "there will be reforms come January" when the regular 60-day session begins.
Telling numbers
As the debate continues, the AP's review of the past fiscal year shows:
The review also confirms some fears about the proliferation of the machines. Only one county in 55 -- Webster -- is machine-free.
Other areas have become magnets. The four Northern Panhandle counties had 14 machines for every 1,000 residents last fiscal year, nearly triple the statewide average.
The commission counted 8,162 statewide as of June 30, nearing the 9,000-machine cap set by state law. While most locations are limited to five machines apiece, clubs affiliated with fraternal organizations and veterans groups get up to 10 machines.
Dan Guida, who owns seven Northern Panhandle clubs, blames growing complaints on the scramble for the right to host the last machines allowed under the cap.
"Everybody wanted a piece of it, so they opened up wherever," says Guida, president of the new West Virginia Limited Video Lottery Retailers Association. "If there were only 5,000 or 6,000 machines instead of 9,000, we wouldn't be having this conversation."
No one should be shocked by the visibility or the public outcry, says Bill Eadington, director of the Nevada-based Institute for the Study of Gambling and Commercial Gaming.
Anytime poker and slot machines are allowed outside casinos, criticism follows. He says it's happened in Louisiana, South Carolina, and in Canada, Australia and New Zealand.
Montana, Nevada and Oregon continue to allow gambling machines in bars and restaurants, according to the American Gaming Association.
"You have to be absolutely blind to not understand the impact of the legalization of slots," says Eadington, a professor at the University of Nevada, Reno. "If they didn't anticipate that, they're foolish, and if they did know it was going to happen, they're observing the fruits of their labor."
An uphill battle
And gambling opponents face long odds in whittling the business down, says industry consultant I. Nelson Rose. He warns it's "almost impossible" to eliminate video poker once it's established.
There have been no meaningful rollbacks of gambling in the United States since casinos were legalized in Nevada in 1931, says Rose, a professor at Whittier Law School in Costa Mesa, Calif.
Yet, South Carolina's video poker industry was outlawed by the courts in 2000, and Louisiana voters banned slots in 33 of 64 parish-by-parish referenda in 1996.
"Usually they fail not only because the industry is powerful politically," Rose says, "but also because somebody else realizes, 'Hey, they're paying my taxes.' "
And once the industry is established, those who have invested in it have property rights and can sue.
Tom Fittro, president of the West Virginia Amusement & Limited Video Lottery Operators Association, says the state should let video poker run for 10 years before revisiting the law.
Permits required to own a machine must be renewed each year with an annual fee, but they all expire June 30, 2011. However, the Lottery may suspend or revoke machine permits and retailers' licenses if a violation occurs before then.
Fittro says former Gov. Bob Wise, architect of the 2001 video poker law, wanted to "restrict, control and regulate an industry that had been operating a long time in the state with no controls, no regulation and very little revenue for the state of West Virginia. That's been a success."
Illegal machines
The State Police counted more than 12,100 illegal gambling machines in bars, clubs, convenience stores and gas stations before the 2001 law passed, says Fittro, whose group represents 35 of the 37 companies licensed to lease machines to retailers.
"Most people complaining about these places don't go to them, but when they're driving down the street, they see them," he says. "They've never been in one, and they don't know what goes on inside."
Donna and Jim Britton know.
They own The Mill Place, a complex in Bruceton Mills that is part restaurant, part hardware store and part gift shop. The video poker room is easy to miss, hidden from the dining area by wood paneling.
The Brittons, who have one wall covered with vintage political buttons and photographs of Ronald Reagan and both Presidents Bush, earned the state $70,000 with their five machines last fiscal year, and received $91,800 as their retailer-operator share.
The couple say they voted against gambling when they had the chance years ago. But today they're in a business they believe is out of control partly because of the Alcohol Beverage Control Administration.
The Brittons claim the agency "freely handed out" Class A liquor or beer licenses that allowed limited video poker parlors to pop up everywhere.
"But the state's greedy," Jim Britton says. "They just want the money, and they don't care."
ABCA spokesman Gary Robinson says his agency is not to blame.
"When we issue a license, we're not issuing with LVL (limited video lottery) in mind," he says.
The ABCA follows the rules for things like background checks and bonding. If applicants meet all the criteria, the agency cannot legally deny a license, Robinson says. The agency doesn't ask and doesn't know if slots are planned.
Still, some club owners say a crackdown is needed.
At Front Street in Weirton, Banketas has freshly paved parking areas and more surveillance cameras than the law requires. Inside, he has new carpet, pricey black stools, flat-screen TVs and friendly bar managers offering chips and change, sandwiches and soda.
"I believe in building a quality place and complying with the spirit of the law and the letter of the law," Banketas says. "Money's always the driving force, but if you can't afford to do it right, don't do it -- because you give everybody else a bad name."
Many people in Weirton are doing video poker the right way, he says, converting dilapidated, long-vacant buildings into thriving businesses that he estimates employ some 800 people.
But he agrees with those who say there are too many clubs too close together. He wouldn't mind the state requiring more parking and more surveillance, and he welcomes stricter enforcement of other rules already on the books.
"I wish the governor and the Legislature would recognize people who are doing it right and separate us from the guys who are milking it and doing it wrong," he says. "We've got negatives, no doubt, but I think somebody should look at the positives, too."
Tuesday: A look at who's winning big in West Virginia.
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